PPI Deadline Announced!
After months of speculation the city watchdog has finally sought to draw a line under one of the biggest financial scandals involving the banking industry by setting a deadline for PPI claims to be submitted by 29th August 2019.
This proposed deadline should bring to an end a scandal that has so far cost up to £30 billion in compensation payouts for some of Britain's largest financial lenders.
The Financial Conduct Authority (FCA) announced 29th August 2019 as the final deadline for PPI claims via a press release.
Chief executive of the, FCA, Andrew Bailey said: "Putting in place a deadline and campaign will mean people who were potentially mis-sold PPI will be prompted to take action rather than put it off. We believe that two years is a reasonable time for consumers to decide whether they wish to make a complaint”.
The decision has been taken by the FCA after careful consideration of all the feedback received. In order to create awareness about PPI and soon to be imposed deadline, the FCA plans to launch a two year awareness campaign.
Banks across the country are still setting aside billions to cover the cost of PPI refunds to people who were mis-sold PPI policies.
Reaction To The FCA Announcement
The announcement of the PPI deadline has lead to criticism in some quarters from consumer groups who were unhappy with the process of the compensation system. Many believe that banks should have been actively locating customers who were wrongly mis-sold PPI and paying them back.
Vickie Sheriff, director of campaigns at Which?, said: "It has been clear for years that the banks should be working much harder to resolve PPI claims fairly.
The current process has been wholly inadequate and driven too many consumers to use claims management companies. Now the regulator has confirmed a deadline for the victims of this mis-selling scandal to make a claim, it must ensure that banks are doing much more to help customers get back the money they are owed."
Martin Lewis, founder of Moneysavingexpert, said: "The deadline is a mistake. The stats are plain. Flabbergastingly, in over half of all cases where after the bank rejects a PPI reclaim people take it to the independent ombudsman, the bank's rejection is overturned”.
The Financial Ombudsman Service had disclosed that PPI continued to dominate most of its complaints relating to financial businesses such as banks and insurers earlier this week. The FOS announced that it had received 78,000 PPI complaints in the last six months alone.
However, Citizens Advice were pleased with the announcement believing it “will help to draw a line under this ongoing scandal”.
Why Has A Deadline Been Enforced?
Forcing People To Come Forward With Their Claims
One of the most important reasons behind the imposition of a PPI deadline was to force people who have not yet made a claim for PPI to take the requisite action. One worry about the deadline is that people with legitimate claims for PPI might miss out on refunds they are rightfully owed. However, the two year awareness campaign that the FCA intends to undertake should inform most people about the opportunity to claim for compensation.
Freeing up the Financial Ombudsman Service (FOS)
PPI dominates the FOS workload as the independent arbiter has the right to decide over a complaint if the customer is not happy with the way their complaint has been dealt with by the financial institution.
The FOS received its one-and-a-half millionth complaint relating to PPI in March last year, more than 50% of these complaints were associated with the unhappiness of people relating to the product itself.
Up ‘till now the FOS has upheld 66% of the PPI complaints it receives, which means almost 34% of the time the FOS has ruled in favour of financial institutions. Once PPI is over, the FOS can devote more of their time in continuing their excellent work of tackling other 'bad behaviour' of financial firms which perhaps do not come under notice that often.
Implications of the PPI deadline
People Who Have Been Mis-Sold PPI Have To Rush Forward With Their Claims
If you were mis-sold a PPI policy by a financial firm, you will have to register your official complaint before 29th August 2019. Complaints made after the deadline won't be considered by the financial lender or the FOS.
Complaints made ahead of the deadline will be allowed to run its normal course until a decision can be reached.
Some people will still be eligible to make a claim for PPI after the August 29th 2019 deadline if:
- They had bought a new PPI policy after August 29th 2017, the deadline won't apply for them.
- They have a live PPI policy or buy one at a future date and if the they make a claim for payout on that policy (for example, if the person loses their job and wants to make a claim as a result). If the firm rejects their claim and if the claimant wants to dispute that decision, the PPI deadline won't apply.
Support Announced For Vulnerable Customers
The FCA has also announced its attention to put "enhanced support arrangements" in place for vulnerable PPI customers who contact them on their helpline. However, the PPI deadline WILL apply to this group.
A strong proportion of people who are due refunds but have not yet made a claim are thought to consist of vulnerable customers and this announcement will come as a welcome boost.
Vulnerable customers might now be able to benefit from face to face assistance if the helpline staff at the FCA feel that they might require such type of help on being contacted.
New Grounds For Claims Opens Doors For Many More Complaints
The FCA has also put in place rules to guide financial firms on how they should handle PPI complaints in wake of the landmark 'Plevin' ruling made by the Supreme Court.
Plevin Vs Paragon Personal Finance
This case involved the interpretation and application of section 140A of the 'CCA' (Consumer Credit Act). This act allows the court to re-open a credit agreement, if the relationship between the debtor and lender is considered to be unfair (amongst other factors) due to anything done or not done, on behalf of or by the creditor.
Mrs. Plevin had applied for and received a PPI policy which was arranged for her by a broker. Both the broker as well as the lender, 'Paragon' ( Paragon Personal Finance Limited) received an undisclosed amount as commission for arranging the PPI policy for Mrs. Plevin. Mrs. Plevins contention was that the relationship between herself and her lender (Paragon) was unfair because of:
- The fact that the commissions received were not disclosed to her
- The failure of any party to assess whether a PPI policy was suitable to her needs
Therefore, Mrs. Plevin argued that broker had acted on behalf of the lender.
The Court Of Appeal held that the failure on the part of the broker to carry out the required needs assessment, which is something mandated for each and every broker under the ICOB rules, was something that the lender (Paragon Personal Finance Limited) was responsible for which rendered the whole relationship unfair.
On the other hand the Supreme Court:
- Disagreed with the Court Of Appeals discovery that the situations in this case pertaining to the failure on part of the broker to conduct a proper needs assessment for the claimant could be treated as something that is done by or on behalf of Paragon Finance BUT
- Held the fact that the existence as well as full extent of the commission paid to both the broker and Paragon Finance was not disclosed to the claimant made the entire relationship unfair under the terms of section 140A of the CCA 1974( Consumer Credit Act).
Based on the landmark Supreme Court ruling on the Plevin Vs Paragon case, the FCA now says that if the cost of a PPI policy constituted more than 50% of the total commissions paid and if the person taking out the policy was not made aware of this fact, they are due back the difference along with associated back interest. However, this rule will only come into effect officially on 29 August 2017.
Firms have been instructed to write to claimants who were rejected previously but, are now eligible for compensation under the Plevin ruling.
What Is PPI?
Any person who has taken out a mortgage, loan, store card, credit card, car finance or other forms of credit has likely also paid for a PPI policy ( either knowingly or unknowingly). PPI stands for Payment Protection Insurance, it is also known as loan repayment, loan protection, ASU (accident, sickness and unemployment), credit insurance, account cover or payment cover. This policy provides financial cover if the policy holder is unable to meet their loan repayment obligations due to any of the following reasons:
The benefits of this policy depended largely on the terms and conditions specified on an individual PPI policy. Usually, a PPI policy covers a person for a set period of time (mostly up to 12 months). Some PPI policies might offer longer periods of repayments. Credit/store cards PPI provides cover for minimum payment for one year or for a percentage of the outstanding balance. Once the claim duration expires, the consumer has to arrange for the payment of the remaining installment themselves. If the PPI policy taken also includes life insurance, the policy will make all the remaining loan payments in the unfortunate event of the person's death.
Due to the mis-selling of PPI policies on an almost industrial level, a financial firm can no longer sell PPI when a person is also taking out some form of credit.
Was PPI Actually A Useful Product Or Is It All Just A Big Scam?
PPI is not a scam or necessarily a bad product, but the big problem was that PPI policies were mis-sold to a large extent to people who were:
- Unaware of PPI being included into their loan policy
- Not eligible to claim from it or
- Not in need of the policy in the first place
Let's take a look at some of the big issues concerning PPI:
The investment bank Credit Suisse First Boston (CSFB) and the OFT conducted a study that found out that claims ratio for PPI policies was found to be around 20%, which means that for every pound you pay as a policy holder in PPI premiums, the policy pays twenty pence in claims. This figure is significantly lower than any other type of general insurance you take out.
- PPI Policies Only Offer Partial Protection
Many studies found that only one in six PPI claims were accepted by insurance providers. More importantly the FSA found that almost 50% of PPI selling firms were not informing customers about information relating to benefits and potential exclusions. Therefore, there has been previously recorded instances wherein a PPI policy with an age exception of 65 years was sold to a 65 year old man or when a PPI policy was sold to people with mental disabilities even though there was no way they could have claimed from it.
- Industrial Level Mis-Selling Of This Policy
PPI's were greatly profitable for banks and therefore customers were aggressively targeted and sold PPI policies. Banks and other financial institutions had put incentive structures in place which led to a high volume of non-compliant sales.
How To Apply For PPI Reclaim?
Locate all your paperwork. There is no time limit to apply for PPI refund, so you can look for documents that go as far back as possible that can act as evidence in your claim. Check documents relating to loans, mortgages, credit cards, overdrafts and store cards to see if you have paid for PPI premiums. Remember it possible that PPI is referred by terms such as payment insurance or sickness, accident insurance in your documents. If you cannot find your documents, there is no need to worry as you can request your lender to provide a copy going back up to six years.
Check if you were mis-sold the PPI policy. Typical examples of mis-selling include if you were falsely informed about PPI being compulsory or if you were informed that by taking out a policy you were reducing your loan costs. In certain scenarios, PPI was added without the consent or the knowledge of the policy holder. It is important to remember that the lender was obligated to educate you about the policy and ensure that it was applicable for you.
Write an application or letter to the loan or credit card provider from whom you bought the PPI policy. Explain in the letter why you think you have been mis-sold PPI and also attach all relevant documents to the letter.
You may have to except a rejection from the lender regarding your PPI policy. Sometimes banks or other lenders may pay out immediately when they are handling a legitimate claim, but such instances are not that common. A rejection of your claim does not necessarily mean that you do not have a valid claim. It could be just be tactic intended to discourage you from taking further actions. If you believe that you have been mis-sold a PPI policy, then just accept the rejection as part of the whole process.
Let iSmart Make The Entire Process Easy For You
iSmart were established in 2007 and have to date claimed back £274m of refunds for our customers.
Handling PPI reclaims on your own can be time consuming and hassle causing, which is why many choose iSmart to handle PPI claims on their behalf. You can use the iSmart FREE check to determine whether PPI was included onto any of your accounts.
Why It Can Be Easier To Get Back Your PPI Compensation Through iSmart
Making a PPI claim directly is not as straightforward as it has been made out to be and here's why:
- Stalling Tactics Employed By Banks
Even if you have a valid claim for PPI, there is a possibility that your claim might be rejected by your bank.
Studies have shown that almost 33% of PPI claims rejected by banks are being subsequently upheld when taken to the FOS. The primary reason for such large scale rejections of valid PPI claims is to discourage people from taking their claim further.
The latest figures released by the FOS still show that customer complaints are not being dealt with fairly by banks. The figures show that the number of complaints against financial lenders continue to remain high, while an alarming number of decisions are being made against financial institutions.
The banking industry has been reportedly accused of compounding their own problems in the biggest scam ever to hit the industry by employing stalling tactics in the hope of wearing people down so that they get tired of the process and give up on their claim entirely.
Past FOS figures have found Lloyds Bank to be the worst offender of this tactic with nearly 78% of their complaints being upheld by the FOS.
- PPI Deadline Is Going To Cause A Mad Rush Of Complaints
The PPI deadline announcement means that the clock is ticking now with regards to PPI complaints. Everybody would be looking to make a claim and with the soon to be released awareness campaign that number is only likely to increase which might lead to a considerable backlog and delay for you to receive your PPI compensation.
By choosing iSmart you can leave the entire process up to us and do not have to worry about dealing with time consuming and physically exhausting bank procedures or complaint backlog
Claiming for PPI compensation- the iSmart way
Here at iSmart, we are dedicated to helping everyone who is entitled to compensation and that's why we have come up with a simple and quick process for making your PPI claims.
Step One: Check Your Finances
Take a detailed look at all your financial agreements and loans since the start of 2001. Verify if you have paid for PPI premiums.
If you are not finding anything that relates specifically to PPI, check for terms such as 'loan insurance', 'credit insurance', 'loan protection' or something similar. Don’t worry if you do not have the paper work, our simple FREE check does not require any account numbers (see step 2)
Step Two: Contact iSmart
Fill in our easy to use free check form at the top of the page. We simply need your name, date of birth, current address and for you to select from the drop down list the lenders that you have historically borrowed from that could have potentially added PPI to your agreement. We will then post out to you a Letter of Authority (LOA) for each lender for you to sign and return to us in the free post envelope included.
Step 3: Let Us Crack On With The Process And Wait For An Update
Once we receive your application, we will do the PPI check for you. All you need to do is sit back, relax and wait for us to contact you. This process might take up to 50 days.
We may contact you in the interim if we need further information.
Step 4 : The Results
Once we have established that you have PPI, we will discuss your options with you, which include:
- You can make a complaint against your lender on your own or
- You can let us see out the rest of the process for you and make sure that you get back your rightful compensation however there is no obligation for you to take this route.